DOL Temporarily Extends Non-Enforcement Relief for Investment Advice Fiduciaries

On October 25, 2021, the U.S. Department of Labor (“DOL”) issued Field Assistance Bulletin (“FAB”) 2021-02 , temporarily extending its non-enforcement policy regarding certain rules applicable to fiduciaries who provide investment advice for 401(k) plans, in accordance with Prohibited Transaction Exemption (“PTE”) 2020-02, released in December 2020.

The temporary non-enforcement policy now extends generally through January 31, 2022; it was originally set to expire on December 20, 2021.

The original non-enforcement policy, in FAB 2018-02, was in response to a March 2018 Fifth Circuit U.S. Court of Appeals decision that vacated most of the DOL’s “fiduciary rule” as then scheduled for a tiered implementation. (See our article for details.)

DISCLAIMER: This article is intended as a general overview of FAB 2021-02 as it affects 401(k) plans and their investment advice fiduciaries. It is not meant to address the details of plan investments, the “fiduciary rule,” investment advice, or previous or related DOL guidance on this topic. As always, be sure to consult with your own ERISA attorney or other professional advisor for individualized advice with respect to your plan’s unique situation.

Background

In 2017, the DOL issued final regulations that significantly expanded the definition of “investment advice fiduciary” under ERISA.

• Although designed to ensure that investment advisors act in the best interests of ERISA retirement plan participants and their beneficiaries, the new rule was controversial from the start. The financial services community, and especially ERISA plan investment advisors, strongly opposed the regulation.
• The new rule was originally scheduled to be phased-in between April 2017 and January of 2018; however, in 2017, the Trump administration issued an executive order that resulted in the DOL extending the phase-in period to July 2019.

In 2018, After the Fifth Circuit invalidated the final regulations in March (see above), the DOL issued FAB 2018-02.

• The temporary non-enforcement policy contained therein permitted financial institutions to rely on certain temporary standards enumerated in the guidance. (See our blog post for details.)
• The DOL clarified that it would not pursue prohibited transaction claims against investment advice fiduciaries who work diligently, and in good faith, to satisfy the impartial conduct standards described in the  prohibited transaction exemptions.

In December 2020, the DOL incorporated the impartial conduct standards referenced above into prohibited transaction exemption (“PTE”) 2020-02, which became generally effective on February 16, 2021.

• The non-enforcement policy stated therein was scheduled to expire on December 20, 2021 – a date which seemed “odd” because, for example, it does not align with most fiduciaries’ existing disclosure schedules, or with their desire to satisfy the PTE’s retrospective review requirement on a calendar-year basis.

FAB 2021-02 Temporarily Extends Non-enforcement Relief.

Accordingly, to allow time for investment advice fiduciaries to transition to PTE 2020-02 (see above), FAB 2021-02 provides that, for the period extending from December 21, 2021 through January 31, 2022, the DOL will not pursue prohibited transactions claims against investment advice fiduciaries who are working diligently, and in good faith, to comply with the impartial conduct standards contained in the PTE.

Additionally, for the period extending from December 21, 2021 through June 30, 2022, the DOL will not pursue prohibited transactions claims against investment advice fiduciaries who are otherwise in compliance with PTE 2020-02 based solely on their failure to comply with certain disclosure and documentation requirements contained in the PTE.

COMMENT: In light of the relatively short nature of these extensions, it appears somewhat doubtful that further extensions will become available; however, as always, we will be keeping our eyes open and will be sure to keep you informed of future developments in this regard.

The information and content contained in this blog post are for general informational purposes only, and does not, and is not intended to, constitute legal advice. As always, for specific questions concerning your 401(k) retirement plan, or for help in operating your plan during the current COVID-19 crisis, please consult your own ERISA attorney or professional advisor.